Keys to understand the world of cryptocurrencies

The trends of the new economy are moving rapidly and more and more citizens and companies are interested in buying cryptocurrencies. Thus, it is important to unsderstand the basic terminology that is handled in this field to have a solid background and be successful.

The first term to define could be, of course, cryptocurrency. It is a coin that is generated with the resolution of mathematical problems based on cryptography. Its value depends on supply and demand. It offers advantages in terms of security and speed of transactions thanks to its international, decentralized, voluntary and anonymous use. The first known is Bitcoin, launched on the market in 2009.

The term Blockchain is also important. It refers to the different links or storage blocks of information in Bitcoin technology. In simple language, the blockchain eliminates banks as intermediaries in transactions between users, since the action is handled by millions of nodes through the network. It works in the following way: if a client A wants to transfer a Bitcoin to a client B (this is reflected as a “block”), it notifies the network, there the participants authorize the transaction, the block is added to the chain for its registration and processing and, finally, the amount moves from A to B.

Another term to deal with are virtual wallets. Its function is that of a physical wallet: store the money. In the digital world people talk about money exchange, online portfolios or cold wallets. Let’s take the latter as a reference for a simple explanation. A cold wallet is a hardware for storing cryptoactives safely and without Internet as main controller. It is like a bank account but without the dependence of the physical entity or its digital programs.

Finally, it is necessary to rmention digital signature. It is nothing more than the mathematical process through which the authenticity of the sender of Bitcoins is verified. Then, that person must settle public and private passwords of the sender so that the receiver can verify the transaction or payment, without intermediaries.

M.Pino

Source: Criptonoticias

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